Demystifying Cryptocurrencies, Blockchain, and ICOs
Bitcoin, blockchain, initial coin offerings, ether, exchanges. As you’ve no doubt noticed, cryptocurrencies (and their corresponding jargon) have caused quite the uproar in the media, online forums, and perhaps even in your dinnertime conversations. Despite the buzz, the meanings of these terms still elude many people’s comprehension. Perhaps we could put it as simply as Stephen Colbert does below, but we’ll be a tad more precise.
Originally known for their reputation as havens for criminals and money launderers, cryptocurrencies have come a long way—with regards to both technological advancement and popularity. As of earlier this month, the market cap of Bitcoin exceeded $70 billion, with peak trading volumes around $3 billion per day. The technology underlying cryptocurrencies has been said to have powerful applications in various sectors ranging from healthcare to media.
With that said, cryptocurrencies remain controversial. While critics including economist Paul Krugman and Warren Buffet have called Bitcoin “evil” and a “mirage,” others, such as venture capitalist Marc Andreessen, tout them as “the next internet.” For every person declaring that cryptocurrencies are in a bubble, there’s another insisting that they are the next wave of the democratization of finance. At their simplest, they are merely the newest fintech fad; yet at the most complex level, they’re a revolutionary technology challenging the political, economic, and social underpinnings of society.
This article will attempt to demystify cryptocurrencies’ appeal, its complex underlying technology, and why a purely digital currency is able to have value. It will also examine the outstanding issues surrounding the space, including their evolving accounting and regulatory treatment.